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Why Is Loews (L) Flat Since Last Earnings Report?

A month has gone by since the last earnings report for Loews (L). Shares were flat in that time frame, outperforming the S&P 500.

Will the recent trend continue leading up to its next earnings release, or is Loews due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Loews Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Loews reported first-quarter 2019 earnings of $1.27 per share, which beat the Zacks Consensus Estimate by 30.9% and increased 42.7% year over year.

The improvement stemmed from higher earnings contributed by CNA Financial and Boardwalk Pipeline Partners, LP as well as higher parent company net investment income, which were partially offset by lower earnings at Diamond Offshore.

Behind the Headlines  

Operating revenues of $3.7 billion increased 4.3% year over year. Higher premiums and net investment income aided the top line.

Total expenses increased 2.3% year over year to $3.2 billion on higher insurance claims and policyholders' benefits as well as higher operating expenses.

Book value excluding accumulated other comprehensive income as of Mar 31, 2019 was $63.59 per share, up 2.3% from $62.16 as of Dec 31, 2018.

Segment Details

CNA Financial’s revenues increased 6.3% from the prior-year quarter to $2.7 billion. Its reported net loss attributable to Loews Corp. was $305 million, up 16.9% year over year. The quarter witnessed higher net investment income and net investment gains. Also, net retroactive reinsurance benefit under the 2010 loss portfolio transfer with National Indemnity aided the upside.

Boardwalk Pipeline’s revenues increased 2.7% year over year to $346 million. Net income surged 119.4% to $79 million. The company witnessed higher earnings from firm transportation contracts mainly due to growth projects recently placed into service, partially offset by contract restructuring and expirations as well as lower storage and parking and lending revenues.

Loews Hotels’ revenues declined 4.3% year over year to $180 million. Income from Loews Corp. was $13 million, flat year over year. Improved operating performance from several owned hotels was offset by pre-opening expenses incurred at hotels under development and a charge related to the planned disposition of a property.

Diamond Offshore’s revenues plunged 21.1% year over year to $236 million. Net loss attributable to Loews Corp. was $37 million against net income of $10 million in the year-earlier quarter. This downside was due to continuing challenging market conditions.

Share Repurchase Update

The company bought back 6.8 million share for $322 million in the first quarter.  Subsequently, through Apr 2, 2019, it repurchased another 1 million shares for $47 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Loews has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Loews has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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